The Management Company for Assets Arising from the Banking Sector Reorganisation (Sareb), booked a total of €2,308 million in revenues from property and financial asset management and sales in 2019, down 34% y-o-y. However, by reducing operating expenses and keeping margins from narrowing as much as previously, Sareb’s new strategy resulted in a slight improvement in pre-tax profit/(loss), which reached EUR -864 million, compared to EUR -879 million in 2018.
Net profit/(loss) for the year stood at EUR -947 million, after the company paid EUR 83 million in taxes during 2019 corresponding to Deferred Tax Assets that will not be recovered in the future. At YE 2019, the company’s total equity stood at EUR 1,659 million.
In total, EUR 1,328 million of the company’s 2019 revenue were generated via property management and sales, while EUR 934 million related to loan activity and EUR 46 million to other sources of income. 2019 was the first year in which properties became the primary source of Sareb’s revenue, following the launch of its new business strategy earlier in the year.
This new strategy aims to reduce the sale of loans to institutional investors, ramp up its process for transforming loans into properties via donations in lieu and foreclosures, and drive residential development and land planning management. Sareb converted EUR 1,867 million of its loans into properties during 2019, up 33% y-o-y and adding 21,140 properties which were previously booked as collateral property to the balance sheet.
The strategic plans implemented by the company in 2019 also helped to limit gross margin losses, which fell by 17% in 2019, compared to 28% in 2018. In addition, operating expenses fell to a total of EUR 670 million in 2019, down 4% y-o-y.
Debt repayment and property portfolio reduction
With its activity, the company continues to fulfil the mandate it received from the financial authorities to gradually divest the portfolio it acquired from the banks that were given government funding, and thereby cancel the debt issued when it was first created. In 2019 alone, Sareb was able to repay some EUR 825 million in debt. During the seven years since its creation, the company has cancelled EUR 15,676 million in debt.
In addition, since its foundation in 2013, Sareb has reduced its NPL portfolio by 51% and its overall portfolio by EUR 18,507 million – down 36%. Sareb currently manages a portfolio valued at EUR 32,274 million, of which 60% relates to property development loans and 40% to property of various types.
Activity in 2019
As previously stated, the company has been focusing on real estate investment and land planning management. One of its biggest milestones in 2019 was the creation of Árqura Homes, a development company in which Sareb holds a 90% stake and which has already completed 338 homes. The vehicle aims to deliver a further 500 homes by the end of 2020, as developments currently under construction are gradually completed. Another notable milestone was the sale of its 75% stake in the Socimi Témpore Properties, which specialises in residential lettings.
Thanks to this strategy, Sareb has been able to remain focused on the non-institutional market. During 2019, the company sold a total of 16,948 properties, including residential, land and commercial properties. During the last seven years since its creation, Sareb has sold a total of 106,450 properties.
New social housing programme
Since 2013, Sareb has been developing a social programme, which has seen it sign agreements with 26 local and regional councils. At present, the company has assigned a total of 2,336 homes to various administrations. Additionally, it recently launched a new social initiative, which aims to quadruple this figure to 10,000 homes by engaging with smaller city councils, which are also in need of apartments for social purposes.
The company led by Jaime Echegoyen continues to hold conversations with other administrative areas, as it seeks to offer other assets from its portfolio – including residential, commercial and logistics properties – which could be of use to them.